Mephistopheles Posted February 16, 2015 Share Posted February 16, 2015 A small related rant. When did "insider" become co-opted to mean "anything the SEC determines is unfair?" Let's say when I buy a stock and mention it the price shoots up like Ackman. I buy options and stock hoping to profit from the price action. How is this 'inside information?' All I'm doing is trading the market, I know nothing more than anyone else. Ex-ante I don't know for sure if the stock will rise, it's speculation. This is clearly different than true insider trading where an insider might know about a merger, or earnings or some other significant material market event that causes the stock to appreciate or decline. In retrospect we can always know if something worked or not, but no one truly knows for sure ahead of time, unless the information is truly inside info. A CEO announcing a merger or sale knows there will be a material outcome, they might not know the magnitude, but they know there will be an impact. Secondly what's the timeframe? So Ackman buys a stock and options around a position and announces it and the price rises. So suddenly this is 'inside', but what if the market falls and suddenly the stock trades below his purchase price. Does the SEC re-measure or drop the case? What's the time period? As an outsider it seems arbitrary. If Ackman takes a stake in a company like SHLD, isn't a reasonable assumption that the stock will shoot up quickly? Even if the stock declines he would still be trading on non-public information. It has been shown in other insider trading cases that they actually lost money but were still charged for insider trading. Winning or losing has no say in whether it is proper. As for the timeframe, it is like how Ackman and VRX almost got nailed, and still might, when they worked together to build a position in a company with the likely intention to make a tender offer. The intention is part of the timeframe issue and speaks to the heart of the strategy. If the intention is to trade ahead of your filing to turn a short-term profit to hedge the "risk" of not making enough profit, well I don't see how that is kosher. Obviously the laws are vague. Power to them for taking advantage of it like the way people take advantage of the tax code. I personally think its garbage that something like that is fine, but to each their own. As far is it impacts PSH, I could see how this will make it hard to emulate Ackman's strategy. But I still think it should trade near or below book value. The key, as others have stated, is that it's not inside information about Sears or whatever company it is that he's buying. He doesn't have access to any more information than you do. You (investors) just so happen to respect his opinion so much, so you drive up the share price. That's not his problem. If it were illegal, then there would be no way any respected investor would be able to build a stake that's reported, because he'd be breaking the law. While it's not insider trading, if he were to quickly sell a position that he went public with, I can see why it would be considered market manipulation. But that's if he had the intent of manipulating the stock price for personal gain. Link to comment Share on other sites More sharing options...
Haasje Posted February 16, 2015 Share Posted February 16, 2015 I'm not coming from a particular moral perspective but just curious about the insider trading rules which are not exactly intuïtive to grasp. Ok, so if I understand it correctly: It's legal for Ackman to buy short term options with the expectation of his 13-F causing a spike in the stock price BUT it's not legal if Ackman(or anyone who has the reputation for a lift) doesn't really have a new investment idea near the end of the quarter but buys a stock position solely to profit from the spike after his 13-F with options and sells his position quickly afterwards. Link to comment Share on other sites More sharing options...
giofranchi Posted March 5, 2015 Author Share Posted March 5, 2015 February 2015 Performance and NAV/share at $28.17 GioMonthly-NAV-and-Performance-FEB-2015-Press-Release.pdf Link to comment Share on other sites More sharing options...
giofranchi Posted March 5, 2015 Author Share Posted March 5, 2015 Ackman is already up 6.8% net of fees on 2015, which is undoubtedly very good. I know many are skeptical because he is fully invested in an overheated stock market… But it is precisely in this situation that I like investing with a catalyst (his activist strategies), because it tends to shorten the time required for value to be both created and recognized. Of course, if you want to stay in cash and not to be invested, no catalyst will change your mind. But for those who want to own great businesses no matter what the market is doing I think PSH should be at least taken into consideration. ;) Cheers, Gio Link to comment Share on other sites More sharing options...
Guest wellmont Posted March 5, 2015 Share Posted March 5, 2015 how does this work? I bought some of this at IB and it traded in USD. I was expecting to have to convert currency. anybody understand the mechanics? Link to comment Share on other sites More sharing options...
giofranchi Posted March 5, 2015 Author Share Posted March 5, 2015 how does this work? I bought some of this at IB and it traded in USD. I was expecting to have to convert currency. anybody understand the mechanics? What do you mean exactly? PSH’s assets are USD denominated, just like its stock price… Aren’t they? Gio Link to comment Share on other sites More sharing options...
Ham Hockers Posted March 5, 2015 Share Posted March 5, 2015 how does this work? I bought some of this at IB and it traded in USD. I was expecting to have to convert currency. anybody understand the mechanics? It's Euronext listed but denominated in dollars. Plus, I'm sure you bought the U.S. OTC ticker, which would already be in dollars anyway even if the underlying weren't. Link to comment Share on other sites More sharing options...
Guest wellmont Posted March 5, 2015 Share Posted March 5, 2015 interesting. but I actually bought the psh. didn't realize there was an otc. thanks. Link to comment Share on other sites More sharing options...
Ham Hockers Posted March 5, 2015 Share Posted March 5, 2015 interesting. but I actually bought the psh. didn't realize there was an otc. thanks. Yeah. Most U.S. individuals would probably see PSHZF or something like that at their broker. Link to comment Share on other sites More sharing options...
Guest wellmont Posted March 5, 2015 Share Posted March 5, 2015 tried to trade the otc at schwab and it didn't work. so they are not set up to trade it online yet. even though I can get a quote. >:( Link to comment Share on other sites More sharing options...
Jurgis Posted March 5, 2015 Share Posted March 5, 2015 Be sure that you know how to deal with PFIC if you buy this in taxable account in US. Link to comment Share on other sites More sharing options...
fareastwarriors Posted March 5, 2015 Share Posted March 5, 2015 US persons holding PFIC stock through tax-exempt organizations or accounts will be exempt from Form 8621 filing requirements http://www.ey.com/Publication/vwLUAssets/US_persons_holding_PFIC_stock_through_tax-exempt_organizations_or_accounts_will_be_exempt_from_Form_8621_filing_requirements/$FILE/2014US_CM4364_US%20persons%20holding%20PFIC%20stock%20through%20tax-exempt%20orgs%20to%20be%20exempt%20from%20Form%208621%20filing%20reqs.pdf Link to comment Share on other sites More sharing options...
bobp Posted March 5, 2015 Share Posted March 5, 2015 How about in an IRA? Any issues? Thanks. Be sure that you know how to deal with PFIC if you buy this in taxable account in US. Link to comment Share on other sites More sharing options...
giofranchi Posted March 10, 2015 Author Share Posted March 10, 2015 Amsterdam, 9 Mar. 2015 //‐ Pershing Square Holdings, Ltd. (ticker: PSH:NA) announced today a new position in Valeant Pharmaceuticals International, Inc. (ticker: NYSE: VRX) representing approximately 16.9% of the PSH portfolio (based on the closing NAV of PSH and the closing share price of VRX on Friday, 6 March 2015). Pershing Square Capital Management, L.P., the investment manager for Pershing Square Holdings, Ltd., announced that various funds it manages have purchased 16,473,933 shares of Valeant Pharmaceuticals International, Inc., representing 4.9% of Valeant. GioNew-Position-Release-3.9.15.pdf Link to comment Share on other sites More sharing options...
giofranchi Posted March 13, 2015 Author Share Posted March 13, 2015 http://www.marketwatch.com/story/herbalifes-stock-pares-gains-after-ackman-says-he-wasnt-contacted-by-fbi-2015-03-13 Gio Link to comment Share on other sites More sharing options...
giofranchi Posted March 17, 2015 Author Share Posted March 17, 2015 Pershing Square Responds to The Wall Street Journal Herbalife Article Gio2015-03-13-Letter-to-Investors-re-WSJ.pdf Link to comment Share on other sites More sharing options...
petec Posted March 24, 2015 Share Posted March 24, 2015 So if I knew that Ackman was going to take a position in a stock and that the result would likely be a rise in price, and proceeded to buy up options ahead of it wouldn't that be insider trading? How is that any different than Ackman doing it? He knows the market response and can't really say "oh it was just market craziness." These insider trading laws are stupid. They should just get rid of them or clean up these loopholes. That's a dumb comparison. How do you say that Ackman knowing he himself is buying the stock is insider information? Should he buy it without knowing he is buying it? Should he tell his broker, go buy something but don't tell me what it is cause that would be insider information? Excellent post! I love this idea. I can't see what's wrong with buying stock and options when opening a position. Surely that's a natural expression of a positive view? If the stock then pops when his name is associated with it, so be it. Another way of looking at it is that he is not in possession of material non-public information. What he is in possession of is his buy thesis, and he is acting on it. His knowledge that he is about to buy cannot possible be considered material non-public information: if it was, he wouldn't be allowed to buy stock, let alone options. Which would obviously be ridiculous. Link to comment Share on other sites More sharing options...
petec Posted March 24, 2015 Share Posted March 24, 2015 Liberty, What you say is right of course! But I don't see why what "non-permanent" capital does should affect "permanent" capital. After all they are invested through different vehicles, aren't they? In other words PSH is not subject to redemptions. Gio Gio, I assume that Ackman invests all his funds roughly similarly and pools votes for his activism. So a withdrawal of non-permanent capital could, in theory at least, affect his influence over his investments. Pete Link to comment Share on other sites More sharing options...
giofranchi Posted March 24, 2015 Author Share Posted March 24, 2015 Gio, I assume that Ackman invests all his funds roughly similarly and pools votes for his activism. So a withdrawal of non-permanent capital could, in theory at least, affect his influence over his investments. Pete Yes! Of course you are right! By the way, I have just bought more this morning. ;) Cheers, Gio Link to comment Share on other sites More sharing options...
petec Posted March 24, 2015 Share Posted March 24, 2015 I don't think anyone posted a breakdown of the fees so here is my reading of it: Base fee is 1.5% of NAV before the performance fee is paid. Performance fee is 16% of gains above the previous highest year-end NAV and 0% if they fail to exceed that mark. However, the 16% is reduced by $1 for every $1 paid in performance fees in the same period by Pershing's other funds, namely PSLP, PS2LP, PSI, and (at their discretion) other funds they may launch in the future. These funds totalled $9.9bn in AUM when the IPO prospectus was written and they typically pay a 20% performance fee, not 16%. In their recent performance letter they say that they believe this fee shelter will lead to the performance fee being under 10%. The arrangement cannot cause the performance fee to fall below zero, but if it would do so then the unused fee shelter dollars can be carried forward to the next period. Clearly the listed company gets a better deal than the other funds. I am interested as to why. I wonder if this was intended to encourage holders of the other funds into the listed vehicle (this would seem to reduce fees to Ackman, but would increase his permanent capital). Perhaps the fee shelter arrangement is to compensate holders of the listed company for perceived conflicts of interest. Or perhaps they were just told that a flat 20% performance fee is too high for a closed end fund (it is certainly markedly above UK investment trust fees). Link to comment Share on other sites More sharing options...
jay21 Posted March 24, 2015 Share Posted March 24, 2015 Petec - my guess is: Its an incentive for permanent capital. Imagine investing in the IPO vs his Hf directly. In the IPO you cant withdraw your money, you can sell it on the 2nd mkt but not necessarily at NAV, and you pay a lower fee. Investing directly in the HF, you can withdraw at NAV (probably with a little bit of a lockout) and you pay a higher fee. His investor base is probably institutions that care about being able to get their money out at NAV so they will pay a higher fee for the ability to do so. Link to comment Share on other sites More sharing options...
petec Posted March 24, 2015 Share Posted March 24, 2015 Gio, I assume that Ackman invests all his funds roughly similarly and pools votes for his activism. So a withdrawal of non-permanent capital could, in theory at least, affect his influence over his investments. Pete Yes! Of course you are right! By the way, I have just bought more this morning. ;) Cheers, Gio And I have just joined you! Link to comment Share on other sites More sharing options...
giofranchi Posted March 24, 2015 Author Share Posted March 24, 2015 And I have just joined you! This, I hope, is going be a VERY long term investment for me. Ackman is just 48, and already is a self-made billionaire. He does something I would never be able to replicate myself. And he does it very competently! Moreover, I understand it quite well and like it very much. Biglari is the same for me. He is even younger, and already manages operating businesses too, which give him predictable and meaningful cash flow… but, alas, as you very well know by now, he is more difficult to judge! I will stay invested with both Ackman and Biglari as long as results are more than satisfactory. The day results deteriorate, and the blame is clearly to be put on Ackman and/or Biglari (not on Mr. Market!), I will part ways with them. Period. I hope that day never comes. But, if it does, I am prepared. ;) Cheers, Gio Link to comment Share on other sites More sharing options...
Liberty Posted March 24, 2015 Share Posted March 24, 2015 Probably the first time ever that Ackman has been compared to Bilgari. Link to comment Share on other sites More sharing options...
giofranchi Posted March 24, 2015 Author Share Posted March 24, 2015 Probably the first time ever that Ackman has been compared to Bilgari. Why? They are both activist investors, run concentrated portfolios, like the same kind of businesses (S n S, Burger King), they both look for securing permanent capital, etc. I can see many similarities. Of course, Biglari is also much more controversial than Ackman… Gio Link to comment Share on other sites More sharing options...
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